WTSAO about stocks trading 5

or those interested in developing a simple strategy, here is one that I used in the past. It would have gotten you out of the May 2010 crash and got you back in at the bottom at the end of August 2010.

I came up with the idea when I figure traders want to get in on a strong reversal signal and like to hold onto their trades until the final end. The MACD is a lagging indicator so its perfect for those that can't let go of their stock.

I use Ameritrade so I've add the entry and exit code.

Entry: Buy when the today's MACD histogram value is greater than yesterday's; yesterday's histogram value is less than the day before and today's histogram value is greater than the the histogram value 2 days ago.

MACD[Diff,Close,12,26,9,D,2] > MACD[Diff,Close,12,26,9,D,1] AND
MACD[Diff,Close,12,26,9,D,1] < MACD[Diff,Close,12,26,9,D] AND
MACD[Diff,Close,12,26,9,D] > MACD[Diff,Close,12,26,9,D,2]

Exit: Sell when the MACD line crosses below the MACD signal line.

(MACD[MACD,Close,12,26,9,D] < MACD[Signal,Close,12,26,9,D] AND MACD[MACD,Close,12,26,9,D,1] >= MACD[Signal,Close,12,26,9,D,1])

I use DDM to test against the DOW assuming each trade is at 100 shares, with a $10 commission to buy and $10 to sell. The larger the trade, the better the results as commission doesn't eat away at it.

For 1/1/2009-12/31/2009
Profit/Loss: up 61% for the year
Winners/Losers: 5/3
Percent Winners: 62.5%
Average Trade: $195
Average Winner: $386
Average Loser: $123
Drawdown: $396

For 2010 to present you would still be on the plus side:
Profit/Loss: 3% to present
Winners/Losers: 1/3
Percent Winners: 25%
Drawdown: $370

If you add a stochastic filter, you would be up about 15% for 2010

New Entry:

MACD[Diff,Close,12,26,9,D,2] > MACD[Diff,Close,12,26,9,D,1] AND
MACD[Diff,Close,12,26,9,D,1] < MACD[Diff,Close,12,26,9,D] AND
MACD[Diff,Close,12,26,9,D] > MACD[Diff,Close,12,26,9,D,2] AND
Stochastic[StocK,14,3,1,D] < 50

% Winners: 100
Winners/Losers: 2/0 (2 trades for the year!)

There is done with no stop limits in place.